GAAP operating income was $5.3 million, and non-GAAP operating income was $7.5 million, an improvement of $15.0 million and $13.3 million, respectively.

GAAP net income was $3.8 million, or $0.01 per diluted share, and non-GAAP net income was $6.0 million, or $0.02 per diluted share. This represented an improvement of $0.05 per diluted share on both a GAAP and non-GAAP basis.

"We began this fiscal year with a clear focus on delivering solid growth and profitability, and our results in the first two quarters demonstrate our strong execution and increasing momentum," said Jon Gacek, president and CEO of Quantum. "For the first half of the fiscal year, we've increased total revenue by $23 million over the same period last year, growing scale-out storage by 34 percent and data protection — where the market remains challenging — by 3 percent. On this $23 million of additional revenue, we've improved net income by more than $20 million, reflecting the significant leverage our financial model provides as we grow.

"As we start the second half of fiscal 2017, we're focused on continuing to drive scale-out storage growth by further extending our media and entertainment leadership and expanding our footprint in video surveillance and in technical workflows with large unstructured data archive needs. For data protection, we're continuing to leverage our technology leadership, extensive customer base, and channel and technology partnerships to generate profit and cash."

Fiscal Third Quarter 2017 OutlookQuantum provided the following guidance for the fiscal third quarter:

Total revenue of $125 million to $130 million.

GAAP and non-GAAP gross margin of 41-43 percent.

GAAP and non-GAAP operating expenses of $49 million to $51 million and $47 million to $49 million, respectively.

Interest expense of $2.4 million and taxes of $400,000.

GAAP loss per share of $0.01 to GAAP earnings per share of $0.01 and non-GAAP earnings per share of $0.00 to $0.02.

Fiscal Second Quarter 2017 Business Highlights Quantum announced a new media reference architecture for animation and visual effects workflows that is built on the company's award-winning Xcellis™ high-performance storage. This architecture overcomes the time- and resource-consuming challenge of transferring content between animation and editorial departments over a network by optimizing storage capabilities for both operations in a single shared environment, thereby streamlining workflows and boosting overall efficiency and productivity.

The company introduced the DXi6900-S, the first deduplication appliance to incorporate 8TB self-encrypting drives, delivering the highest density backup available and enabling customers to reduce power consumption by 50 percent, compared to competing deduplication appliances. It also integrates the latest SSD technology to provide metadata storage and access. As a result, the DXi6900-S dramatically speeds ingest, read, replication and space reclamation performance, allowing users to complete all these tasks several times faster than with previous DXi® systems and numerous competitive products.

Key scale-out storage customer wins included million dollar-plus deals with a major media company for a multi-faceted project and a global consumer electronics company for corporate video, as well as large deals with a leading car company using video surveillance in its manufacturing facility and a solar company that uses surveillance for product line quality control. Other notable scale-out storage wins included large deals involving technical workflows and management of unstructured data archives at a U.S. military agency, an electric power administrator and a global laboratory testing services provider.

In data protection, major customer wins included million dollar-plus deals at a European banking IT support operation, a large supermarket chain and a U.S. government department, with the first two involving Quantum's new DXi6900-S deduplication appliance.

About Quantum Quantum is a leading expert in scale-out storage, archive and data protection, providing solutions for capturing, sharing and preserving digital assets over the entire data lifecycle. From small businesses to major enterprises, more than 100,000 customers have trusted Quantum to address their most demanding data workflow challenges. Quantum's end-to-end, tiered storage foundation enables customers to maximize the value of their data by making it accessible whenever and wherever needed, retaining it indefinitely and reducing total cost and complexity. See how at www.quantum.com/customerstories.

Quantum, the Quantum logo, DXi, QXS, StorNext and Xcellis are either registered trademarks or trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners.

"Safe Harbor" Statement: This press release contains "forward-looking" statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Specifically, but without limitation, statements relating to: i) our current focuses and priorities; and ii) all of our statements under the heading titled "Fiscal Third Quarter 2017 Outlook" are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum's actual results to differ materially from those implied by the forward-looking statements. More detailed information about these risk factors are set forth in Quantum's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors," in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 3, 2016 and in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 5, 2016. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Use of Non-GAAP Financial Measures

Quantum believes that the non-GAAP financial measures disclosed above provide useful and supplemental information to investors regarding its quarterly financial performance. Quantum management and Board of Directors use these non-GAAP financial measures internally to understand, manage and evaluate the company's business results and make operating decisions. For instance, Quantum management often makes decisions regarding staffing, future management priorities and how the company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, compensation of our employees is based in part on the performance of our business based on non-GAAP operating income.

The non-GAAP financial measures used in this press release exclude the impact of the items below for the following reasons:

Amortization of Intangible Assets This includes acquired intangibles such as purchased technology in connection with prior acquisitions. These expenses are not factored into management's evaluation of potential acquisitions or Quantum's performance after completion of the acquisitions because they are not related to Quantum's core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related charges from non-GAAP measures provides investors with a basis to compare Quantum against the performance of other companies without the variability caused by purchase accounting.

Share-Based Compensation Expense Share-based compensation expense relates primarily to equity awards such as stock options and restricted stock units. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Quantum's control. Management believes that non-GAAP measures adjusted for share-based compensation provide investors with a basis to measure Quantum's core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used.

Restructuring ChargesRestructuring charges primarily relate to expenses associated with changes to Quantum's operating structure. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Quantum has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. Management believes that it is appropriate to exclude restructuring charges from Quantum's non-GAAP financial measures, as it enhances the ability of investors to compare Quantum's period-over-period operating results from continuing operations.

Proxy Contest and Related Costs Proxy contest and related costs are expenses incurred to respond to activities and inquiries of VIEX Capital Advisors, LLC, including their proxy solicitation. These costs are not considered core operating activities. Management believes that it is appropriate to exclude these costs in order to provide investors the ability to compare Quantum's period-over-period operating results from continuing operations.

Crossroads Patent Litigation Costs Crossroads patent litigation costs are expenses incurred to defend ourselves and perform other activities related to a patent infringement lawsuit filed by Crossroads Systems, Inc. These costs are excluded from non-GAAP financial measures because they are not considered core operating activities, and management believes that it is appropriate to exclude these costs in order to provide investors the ability to compare Quantum's period-over-period operating results from continuing operations.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material impact on the company's reported financial results and, therefore, should not be relied upon as the sole financial measures to evaluate the company. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

1 Revenue figures for scale-out storage, data protection, disk backup systems and tape automation include related service revenue. 2 A reconciliation of GAAP to non-GAAP financial measures is included in the accompanying tables. Historical data on non-GAAP items is available in the company's supplemental financial information posted on its website.

The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.

QUANTUM CORPORATION

GAAP TO NON-GAAP RECONCILIATION

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30, 2015

Gross Margin

Gross Margin Rate

Loss From Operations

Operating Margin

Net Loss

Per Share Net Loss, Basic

Per Share Net Loss, Diluted

GAAP

$

46,317

39.6

%

$

(9,619)

(8.2)%

$

(11,227)

$

(0.04)

$

(0.04)

Non-GAAP Reconciling Items:

Amortization of intangibles

48

48

48

Share-based compensation

331

2,447

2,447

Restructuring charges

—

387

387

Crossroads patent litigation costs

—

919

919

Non-GAAP

$

46,696

39.9

%

$

(5,818)

(5.0)%

$

(7,426)

$

(0.03)

$

(0.03)

Computation of basic and diluted net loss per share:

GAAP

Non-GAAP

Net loss

$

(11,227)

$

(7,426)

Weighted average shares:

Basic and diluted

263,058

263,058

Six Months Ended September 30, 2015

Gross Margin

Gross Margin Rate

Loss From Operations

Operating Margin

Net Loss

Per Share Net Loss, Basic

Per Share Net Loss, Diluted

GAAP

$

93,282

40.9

%

$

(17,826)

(7.8)%

$

(21,982)

$

(0.08)

$

(0.08)

Non-GAAP Reconciling Items:

Amortization of intangibles

185

185

185

Share-based compensation

693

5,100

5,100

Restructuring charges

—

645

645

Crossroads patent litigation costs

—

1,640

1,640

Non-GAAP

$

94,160

41.3

%

$

(10,256)

(4.5)%

$

(14,412)

$

(0.06)

$

(0.06)

Computation of basic and diluted net loss per share:

GAAP

Non-GAAP

Net loss

$

(21,982)

$

(14,412)

Weighted average shares:

Basic and diluted

260,766

260,766

The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.

QUANTUM CORPORATION

FORECAST THIRD QUARTER FISCAL 2017

GAAP TO NON-GAAP RECONCILIATION

(In thousands, except per share amounts)

(Unaudited)

Percentage Range

Forecast gross margin rate on a GAAP basis

40.8

%

—

42.8

%

Forecast share-based compensation

0.2

%

Forecast gross margin rate on a non-GAAP basis

41.0

%

—

43.0

%

Dollar Range

Forecast operating expense on a GAAP basis

$

48.6

—

$

50.6

Forecast share-based compensation

(1.4)

Forecast Crossroads patent litigation costs

(0.2)

Forecast operating expense on a non-GAAP basis

$

47.0

—

$

49.0

Dollars per Share

Forecast diluted earnings per share on a GAAP basis

$

(0.01)

—

$

0.01

Forecast share-based compensation

0.01

Forecast Crossroads patent litigation costs

0.00

Forecast diluted earnings per share on a non-GAAP basis

$

0.00

—

$

0.02

Estimates based on current (October 26, 2016) projections.

The projected GAAP and non-GAAP financial information set forth in this table represent forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For risk factors that could impact these projections, see our Annual Report on Form 10-K filed with the SEC on June 3, 2016, as amended by Amendment No. 1 to Form 10-K, filed with the SEC on July 27, 2016 (together, the "Form 10-K"). We disclaim any obligation to update information in any forward-looking statement.

The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.